Mergers & Acquisitions, or M&A for short, refers to the process of combining 2 or more organizations, either through a merger (where 2 organizations combine to form a new organization) or an acquisition (where one organization buys another organization).

M&A activity can have a number of impacts on the organizations involved, as well as on the broader market. For example, M&A can allow organizations to expand their operations, access new markets or technologies, or increase their market share. It can also help organizations to improve their efficiency and productivity—and to reduce costs.

On the other hand, M&A can also create risks and challenges for organizations. For example, it can lead to disruptions in operations, difficulties in integrating the two companies, or conflicts between the cultures of the organizations involved. It can also create uncertainty for employees and other stakeholders.

In fact, in most cases, organizations are not able to fully realize the projected Value Creation from the M&A transaction. A study published in the Harvard Business Review found that the majority of M&A transactions do not deliver the expected returns to shareholders. Another study, published in the Journal of Financial Economics, found that the stock price of the acquiring firm typically declines following an M&A announcement, indicating that the market does not view the transaction as value-creating.

This is why it is critical to also engage in a robust Post-merger Integration (PMI) process following the merger. PMI typically involves several key activities, such as identifying and rationalizing overlapping or redundant functions, integrating systems and processes, and aligning cultures and values. The goal of Post-merger Integration is to create a single, integrated organization that can leverage the strengths and capabilities of the individual organizations; and that can operate more efficiently and effectively than the separate organizations did previously. Organizations often hire management consultants to help with PMI.

For effective implementation, take a look at these M&A (Mergers & Acquisitions) best practices:

• M&A Sell-Side Process Letter - Phase I and Phase II (5-page Word document and supporting Word)
• Change Management Strategy (24-slide PowerPoint deck)
• M&A Buy-Side Non Binding Offer Letter (4-page Word document)
• Mergers and Acquisitions (M&A): Target Operating Model (TOM) (32-slide PowerPoint deck)
• Mergers & Acquisitions Strategic Analysis Toolkit (Excel workbook)

Related Management Topics

• PMI
• Synergy
• Acquisition Strategy

Related Flevy Management Insights: Case Studies

• Merger and Acquisition Optimization for a Large Pharmaceutical Firm
• Biotech Firm Integration Post-Acquisition
• Strategic Acquisition in the E-commerce Sector
• EdTech Company's Acquisition Strategy Enhancement
• Logistics Integration for Precision Equipment Transport
• Ecommerce Platform Diversification for Specialty Retailer
• Media Firm's Cross-Border Acquisition Strategy